Financial Aspects of Adult Day Care: National Survey Results

By Zelman, William M.; Elston, Jennifer M. et al. | Health Care Financing Review, Spring 1991 | Go to article overview
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Financial Aspects of Adult Day Care: National Survey Results

Zelman, William M., Elston, Jennifer M., Weissert, William G., Health Care Financing Review


Current and complete financial information is crucial to making informed decisions about the expansion of adult day care. Although several focused studies have been undertaken, the last comprehensive examination of the financial aspects of adult day care was conducted in the mid-1970s (Weissert, 1976).

This article updates existing information on both revenues and expenses of the growing adult day care industry. Two questions guided the data collection and analyses: How are adult day care centers in the United States currently funded? What are the major operating expenses of adult day care centers? In the Results section of this article, we present a financial profile of the adult day care industry, describe the key components of unit costs, and discuss the possible effects of capacity utilization on the survey findings.

Previous research

A limited number of studies have been published since 1970 that address the financial aspects of adult day care; these include work by Weissert (1975, 1976, 1978); Weiler, Kim, and Pickard (1976); Weiler and Rathbone-McCuan (1978); Weissert et al. (1980); Hannan and O'Donnel (1984); Mace and Rabins (1984); Von Behren (1986); and Conrad et al. (1987).

Revenue sources

Previous research shows that funding for adult day care comes from a variety of public and private sources. At the Federal and State levels, funds are available from Medicaid, Social Services Block Grants, and Older Americans Act monies. Medicare does not reimburse for day care per se; instead, reimbursement is for specific rehabilitive therapies and is often funneled through a certified Medicare outpatient affiliate. Other sources of financing include private fees and donations, local government monies, and foundations. Weissert (1975, 1976), in his study of 10 day care centers, found that centers affiliated with general hospitals or social service agencies were less likely to qualify for the service-specific funding associated with Medicare, but they did receive Medicaid, Social Services Block Grant, and title III funding from the Older Americans Act of 1965 (Public Law 89-73).

A national survey of adult day care centers conducted by the National Institute of Adult Daycare (NIAD) found that Medicaid provided the largest source of funds for the industry, and participant fees were the second major source (Von Behren, 1986). On the other hand, Conrad et al. (1987) found private fees to be the largest single source of funding (25 percent), followed by Medicaid (14 percent) and title XX (12 percent).


Weissert (1975, 1976) found the mean cost per participant day to be $25.09, the daily cost ranged from $11.26 to $61.56, although most centers fell within a fairly narrow range close to the median of $21.32. In a later study, Weissert et al. (1980) found costs among a historically cost-based reimbursement group of primarily health-oriented centers to be $52 per day. In a national survey of day care centers serving clients with Alzheimer's disease, Mace and Rabins (1984) found that the mean cost per participant day was $21.32, with a range of $0 to $55.00 per day. The NIAD national survey found an annual average center budget was $137,085, and the average per diem cost was $31, with a median of $20 (Von Behren, 1986). When inkind contributions were excluded from these calculations, the average cost dropped to $27 per participant day.

Increased operating costs have been found to be associated with service intensity. Weissert (1975, 1976) found that Model I (nursing and therapeutically oriented) centers were generally more costly than social interaction-oriented centers. Weissert also found that per diem costs were higher in Model I than in Model II (social interaction-oriented) centers, an average of $20 and $40, respectively. The highest per diem health service was nursing care, and the highest per diem support service was participant supervision.

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